5 Investing Mistakes To Avoid In Your 20’s

What's up you guys, it's Graham here. So chances are if you've clicked on this video, you've clicked on it to make sure you're not making any of these investing mistakes, which unfortunately I have some bad news for you. Like, no, for real, I actually do have some bad news for you, especially if you have not already smashed that like button. And that's because it's nearly guaranteed you're making at least one of these mistakes. Sorry to be the bearer of bad news.

If anything, I would guess probably 99% of people watching this right now would be able to avoid at least one of these mistakes if they just watched until the very end and then just not do them. But even if you are making one of these mistakes, it's not the end of the world. The best part about this is that none of these are permanent. We all end up making these mistakes, we all go through them, we all learn from them, and then we all come out ahead better in the future.

So with that said, these are the five most common investing mistakes that people make in their 20s and exactly how to avoid them. Let me know which ones you are guilty of down below in the comment section because most likely it's going to be one of these.

The first and biggest investing mistake that people make in their 20s is by simply not investing at all. It's very simple to see why this is such a common mistake. It's very easy for people to say, "You know what, I'm young, I'm gonna live a long time. I may as well just invest in the future. I don't need to do it right now." My favorite one that I hear the most often from people who hate saving and investing is the "but you can die tomorrow, so I may as well just go and buy the avocado just today instead of investing it." Wrong! Do not do that.

Do not miss the opportunity of investing in your 20s because that could set you back tens of thousands or even sometimes hundreds of thousands of dollars in the future. Just consider this: one of the biggest advantages of investing in your 20s is the power of compound interest. This is basically the principle that says your money is going to be making you more money, and that more money is going to be making you more money, and that more money is going to be making you even more, more money.

Basically, the longer you have to invest, the more, more, more money makes you more, more, and more, more money. Does that make sense? Well, let's just go a little bit deeper here. And here is like the fun fact of the day: let's cue some fun fact music right now. The money that you invest in your 20s is worth four times more than the same money that you invest in your 40s. Let me explain.

If you invest $1 at the age of 20 at a 7% return, by the age of 60, that $1 is going to be worth about $15. But if you invest that same $1 at that same 7% return, except you start investing at the age of 40, by the age of 60, that $1 will only be worth $3.87. This means that you're going to need to invest four times the amount of money at the age of 40 than you would need to do at the age of 20 to achieve the exact same result.

This is why your 20s are by far the most important investing years you will ever have in your entire life. And I know I sound super repetitive when I say this, and I know it sounds super dramatic, but it's so true. What you do in your 20s can set you up for your entire life if you just listen. So don't neglect this. If you're in your 20s right now, start investing as soon as you can.

As Shia LaBeouf loves to say, just do it!

The second most common investing mistake that I have seen that we're probably all guilty of at some point or another in our lives is by copying someone else's investment strategy without fully understanding the investment. Doing this is almost like just copying the answers on a math test. I mean, you might be able to copy the answer perfectly; you might be able to even get it right. But the thing is, it teaches you absolutely nothing. You don't know anything about the math problem that you're solving, and you have no idea if you're actually getting the right answer or not.

And this is something I see happening all the time online. You'll see people posting their stock trades, or you'll see people mentioning their stocks in blogs and what they're investing in, and then people just go and blindly invest in the same companies without understanding what they're doing and just assuming that they're going to make money because someone else is doing it. But here's the problem.

First of all, your investing goals are likely a lot different than the person you were copying. The thing is, your age, resources, and risk tolerance are probably not going to be the same as the person on the other side of the screen. The thing is that we're all different. We all have different goals, we all have different risk tolerances, and what could be me just kind of investing in my gambling for fun money could be someone else's entire nest egg that they just can't afford to lose. This is something we absolutely all need to take into consideration.

Now, the second thing when it comes to copying other people is that you should only invest in companies and investments that you fully understand. Otherwise, if it fails and you lose money, you're just going to sit there and blame the other person for why you didn't make money. And doing that is a lot easier than looking at yourself in the mirror and realizing that you are 100% responsible for your own actions. Even if you just take the investment recommendation from someone else, you need to be disciplined enough to understand why you're investing in that in the first place, why it's a good investment, why you stand by it—not just because someone else said so.

The third issue I see with copying somebody else is that most likely you have different entry and exit points than the person you're just copying. Like, by the time someone actually posts about their trades, most likely a few hours or maybe even a few days have gone by. And since then, maybe the price has changed a little bit. The same thing could be said about the exit point. What if the person who recommended the investment just ended up selling it a few days later, and you didn't find out until you've already lost like 20% of your money? And then you sit there and blame the other person because they didn't tell you right when they sold because that's when you would have sold.

So needless to say, this is just not a sustainable trading strategy. Don't do this. Instead, what I recommend doing is just listening to what other people are buying and then being open-minded to be able to do your own research to determine whether or not that might be a good investment for you. This way, you might be exposed to a different way of thinking or maybe consider other investments that you didn't initially think about, but you're not relying on somebody else to do the trading for you.

The third investing mistake that I see so many people make—and this is probably the most common out of all of them—is timing the market. So many people think that they are smarter than those who have decades of experience investing in the markets or that they think they're smarter than the people who invest full-time. And because of that, they believe that they are the exception, and they and only they can consistently and accurately predict when the market is going to go up and when it goes down, and they'll be able to make a killing from that.

Another one that I see happening all the time is that they see the market drops in price, so they decide it's a good time to get in and they buy in. But all of a sudden, they buy in and the market drops even more. So what do they do? They panic, they cut their losses, they sell, and then they think they're gonna buy back in when the market continues to drop even further. But then what ends up happening is that they sell off when they see it dropping even further, and then as soon as they sell, the market goes back up. And all of a sudden, they missed out on all the profit they could have made.

If this has happened to you, make sure to hit that like button. By the way, everyone should be hitting the like button because I guarantee for everyone watching this—unless you're like 14 years old and you've never invested in the stock market before—I guarantee this has happened to you. I guarantee it, because this has happened to me so many times, and I have learned my lesson. The lesson that I have learned is that the best strategy you can take when it comes to investing in the stock market is simply to buy and hold. That's it.

And when it comes to doing this, these are the cold hard facts behind it. Over a 20-year time span, if you miss just the five best trading days in terms of gains—remember, over 20 years—if you just miss those five days, your overall return drops by 45%. Now if you miss the best 10 days, your return drops by 67%. And then if you miss the best 20 days over 20 years, your overall return drops by 91%.

The truth is that probably 99.99999 percent of people will never be able to consistently and accurately predict what the market is going to be doing. What is more likely to end up happening is that you end up sitting out of the market, the market goes up higher, and then eventually you get impatient and you figure, "Well, okay, now I'm going to invest." But you end up buying higher than if you just invested from the very start. And you know what? Sure, I'm not naive to think that many people will get lucky, and many people might be able to buy in on the dips, and then as soon as they buy and it goes back up—or as soon as they sell, it might go back down. But doing that consistently over 20 years is going to be nearly impossible.

So instead, for most people out there, their best chance at getting the highest return possible is simply just by buying and holding. And I don't want to sound like a broken record by saying this like every third or fourth video, but it is the truth, and many people forget this, especially with investing. I feel it's very important you need to be reminded of this. And I've studies that I will link to in the description that detail all of this, so I highly recommend after this video, go in the description, read some of this, and they back up everything that I say.

Okay, so now the fourth biggest investment mistake that people make in their 20s—and again, this is something we're all guilty of—is just getting too emotional or too attached to their investment. Now this is a very, very, very tough one for many people to overcome because there are a few things with this that end up holding you back.

Now, the first thing holding you back is fear, and it's so true what they say: that the fear of loss is much greater than the upside of gain. We fear losing what we have, and that clouds our judgment to grow more of what we do have. This is why mentally, you can go and invest your money, but you just irrationally panic as soon as it goes down in value, and you start fearing losing what you have. You cannot let your emotions get in the way of your investing, and you have to trust the process that long-term, any short-term fluctuations in price do not matter.

If something does end up dropping in price—which is absolutely inevitable at some point or another—just consider it like it's a Black Friday sale and you can just go and buy more at a cheaper price. Now the second thing that also holds us back with this is our ego. And sometimes we refuse to admit that we were wrong, and we end up holding onto a stock much longer than we should, and we end up losing money because we just don't want to sell it.

The reason it's so hard to admit that maybe we're wrong is because if we admit that, then we think to ourselves, "What else could I potentially be wrong about?" And then you start questioning every other investment that you've made. So don't let your ego get in the way of your investing. The stock price has no representation of you as a person. If you buy a stock and it goes up, that does not mean you are smart. If you buy a stock and it goes down, that does not mean you are dumb.

All you can do is make the best decision given the information that you have available to you at the time, and that is it. And when it comes to investing, never let your emotions dictate what you do. Focus on the fundamentals, and that's it. If you just do that and really understand what you are investing in, it really forces you to look at something objectively. And when that happens, you're gonna be less reactive to whatever that stock price does. That is exactly how you want to be as an investor, regardless of whatever you're investing in.

And finally, we have number five. And if you're not doing this, you need to take advantage of this as soon as this video is over. Start doing this. And that is taking advantage of tax-advantaged accounts. These are investment accounts that are designed to save you tons of money in taxes. They're basically a reward that they give you to save money on taxes just to invest, so there's no reason not to take these—ever, especially in your 20s.

The first example of this is investing in a Roth IRA. If you're not doing this, there's no reason not to invest up to $6,000 per year in one of these Roth IRA accounts. And because I just made like a 12-minute video like a week and a half ago explaining exactly what this is, I'm just gonna link to that down below in the description. The same thing can also be said about not taking the employer match on a 401(k).

So after this video, find out if your employer offers an employer match and then contribute up to the maximum. Always! This is pretty much guaranteed free money. Take guaranteed free money! Always take the free money. It blows my mind that people don't do this because they don't know about it. Always take the employer match; you could just double your money if you do this with zero risk. Double money, zero risk. Look that up, employer 401k match on Google—there you go, make some money!

The next thing you could invest in is what's called an HSA, and this reduces your taxable income with whatever money you contribute to this account that you can use completely tax or penalty-free to put towards health-related expenses. Imagine this almost like the healthcare equivalent of a 401(k), except you can use whatever money is in that account at any time for any health-related reasons. And I hate to say it, but at some point or another, you're gonna have some sort of health-related expense. It's inevitable; none of us are invincible.

So you may as well just get the tax-free benefits here of an HSA and contribute to it, and all the money you contribute just rolls over to the next year, to the next year, to the next year. So you may as well just do it. Just do it! Using these accounts, especially if you do this in your 20s, are an absolute game changer. There is no reason for you not to be doing this. Zero reason—just do it! It can give you some free money, you can save some money on taxes—just don't ignore this. Just go and do that. Save some money.

And let's say I just want to say one more bonus mention when it comes to this: this is extremely important! One of the last biggest investing mistakes in your 20s is not going to GrahamSteffenStore.com and scooping up some of that limited edition avocado toast merch! That's right! You guys asked for avocado toast merch; I did it. GrahamSteffenStore.com, I got it! Limiting it just to a hundred units, so just once it's gone, it's gone! So enjoy that avocado toast merch; it's finally there! Scoop some of that up; it's a good investment.

So anyway, with that said, you guys, thank you so much for watching. I really appreciate it. If you made it to the end and you're not already subscribed, you should absolutely subscribe. That should be the seventh investing mistake: just not subscribing because that just takes a quick second to do and it's totally free. So make sure to subscribe. Also, feel free to add me on Instagram; I post pretty much daily. So if you want to be a part of it there, feel free to add me there and check out some of the links and stuff in the description.

Thank you again for watching, and until next time, comment anything down below for the YouTube algorithm. Thanks!